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House of Lords

Wednesday, 14th October 1998.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Norwich.

Lord Bell

Sir Timothy John Leigh Bell, Knight, having been created Baron Bell, of Belgravia in the City of Westminster, for life--Was, in his robes, introduced between the Lord Weinstock and the Baroness Thatcher.

Lord Sawyer

Lawrence Sawyer, Esquire, (known as Tom Sawyer), having been created Baron Sawyer, of Darlington in the County of Durham, for life--Was, in his robes, introduced between the Baroness Gould of Potternewton and the Lord Levy.

Message from the Queen

Lord Camoys: My Lords, I have the honour to present to your Lordships a message from Her Majesty the Queen signed by her own hand. The message is as follows:

    "I have received your Address and relying on the wisdom of my Parliament, I desire that my prerogative and interest in so far as they relate to the composition of the House of Lords shall not stand in the way of considerations by Parliament during the present Session of any measure amending the composition of the House of Lords by providing for the election to that House of holders of Hereditary Peerages from an Electoral College consisting of Peers and of certain other Lords and for related purposes".

Takeovers: EU Proposed Directive

2.47 p.m.

Lord Pearson of Rannoch asked Her Majesty's Government:

    Whether they expect to be outvoted in the Council of Ministers over their resistance to the European Union's proposed Directive on Takeovers; and, if so, whether they will be able to maintain the United Kingdom's independent system of mergers and acquisitions.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, it is too early to say when or indeed whether the proposed takeovers directive will come up for decision at the Council of Ministers, or to predict how the other members states would vote if it did. For the present I believe the UK's interests are best served by seeking to negotiate amendments to the draft directive which adequately address our concerns. My objective is to

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secure a text that would, if adopted, enable the UK to retain its current system which is widely acknowledged to be extremely effective.

Lord Pearson of Rannoch: My Lords, I am grateful to the noble Lord for that reply, which does however appear to confirm that the Government's new charm offensive in Brussels is not yet triumphant. Given that our mergers and acquisitions industry is so much larger than those of the rest of the Community put together, does he agree that the UK has the most to lose from any directive of this kind and especially one which subjects our excellent takeover panel to eventual control by the Luxembourg Court?

Secondly, would he agree also that takeover law should really be left to member states to decide for themselves in accordance with the principle of subsidiarity, which principle, I hardly need remind the Minister, is so much admired by his right honourable friend the Prime Minister?

Lord Simon of Highbury: My Lords, the answer to the first question is that if it were bad law, it would affect everybody, irrespective of the size of their marketplace and we, as a Government, would be against it. As I said, we shall do everything in our power to ensure that our excellent takeover regime is protected on a non-statutory basis.

As regards the second question, absolutely. Subsidiarity plays for all players, but it does not befit us to rule on others' versions of their own subsidiarity which may, in the end, turn out to be useful to us.

Lord Barnett: My Lords, is my noble friend aware that there is virtually nothing he can say that will satisfy the noble Lord, Lord Pearson of Rannoch, and that he should stop trying? However, an important issue arises in this regard; that is, the question of qualified majority voting which is likely to be an even bigger issue when the enlargement of the European Union comes, as I hope it will. Are the Government seeking to make any changes in those rules?

Lord Simon of Highbury: My Lords, I should say to my noble friend that, with the noble Lord's agreement, I was trying to educate him and not persuade him; that is always a useful exercise in your Lordships' House. As I understand it, there are no plans--nor would I speak to them--for changing the impact of QMV attached to this sort of decision.

Lord Borrie: My Lords, does my noble friend agree that if this directive, even as amended, were carried forward it would lead to a great deal of tactical litigation, the postponement of business reorganisation in this country and be bad for the UK economy? If my noble friend agrees with that and that the directive, even as amended, seems to contravene the principle of subsidiarity, have Her Majesty's Government prepared contingency plans for legal proceedings or otherwise should the directive be voted for by the Council of Ministers?

Lord Simon of Highbury: My Lords, my noble friend will agree that he poses a series of hypothetical

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questions. I agree that the effectiveness of our system goes to the heart of our policy. As I said in my original Answer, we will try to ensure that we maintain a non-statutory basis and that the excellent performance of the takeover panel continues to operate in the way that we would desire. I cannot yet comment on any provisional plans because I have no idea how colleagues would vote even if the matter were brought to the Council. Both of those questions are hypothetical at this stage.

Lord Razzall: My Lords, does not the Minister agree that the Europhobia underlying the Question is inappropriate in the circumstances?

Lord Simon of Highbury: My Lords, again, as I listened to the excellent debate yesterday on the European Central Bank, which was a diversion, I found it difficult to understand why we always put everything in terms of phobia or philia. We are trying to make good law on this issue to maintain the best aspects of our takeover panel. I leave others to comment on the quality of phobia and philia.

Lord Stoddart of Swindon: My Lords, is my noble friend aware that the House of Lords Select Committee--Sub-Committee E--which is not Europhobic in any way, recommended that the British non-statutory system was far better than was proposed by the directive or any amended directive? Can my noble friend assure me that the British case will be strongly put forward and, if necessary, challenged in the European Court if the Commission should attempt to force its will on this country?

Lord Simon of Highbury: My Lords, I can assure my noble friend that the British case is being put forward as forcefully as possible in defending what we all agree to be an excellent system. However, I suggest that there are circumstances under which a directive could be useful for British industry in clarifying an improved basis for its takeover activity in Europe. Therefore I do not wish to say that no directive could be written which would be helpful to our cause. We are still in what looks like being a long drafting session and I would not yet wish to test to the limits hypothetical debates in relation to the voting position.

Lord Pearson of Rannoch: My Lords, can the Minister confirm unequivocally to his noble friend Lord Barnett that the directive is subject to single market legislation; that it is therefore subject to qualified majority voting and, if this country is outvoted, there is nothing whatever that we can do about it while we remain within the Treaty of Rome?

Lord Simon of Highbury: My Lords, I agree that it is subject to qualified majority voting. If it comes to a vote there will be occasions when, in practice, we can challenge that later at a higher authority if,

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hypothetically, we saw that it was acting against our interests. However, we are again stepping beyond the scope of the Question.

Malta: EU Membership Application

2.57 p.m.

Lord Wallace of Saltaire asked Her Majesty's Government:

    What attitude they are taking to the reinstatement of Malta's application to join the European Union.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, we welcome Malta's decision to reactivate its application to join the European Union. On 5th October the General Affairs Council asked the Commission to update its 1993 opinion on Malta's ability to take on the obligations of European Union membership. The EU will decide on opening accession negotiations on the basis of the Commission's recommendations.

Lord Wallace of Saltaire: My Lords, I thank the Minister for that Answer. However, is she aware that the population of Airedale is rather larger than the population of Malta? Also, the population of Kosovo, which we were told two nights ago is too small to be independent, is five times that of Malta. Does the Minister accept that, with Cyprus and Malta, we are into the question of micro-states coming into the European Union with their own commissioner and judge in a way that, institutionally, will be hard to make compatible with federal states such as the United Kingdom is becoming? Are not the Government considering pausing before they reactivate Malta's application?

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